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Changes introduced by law 3978/2011 in Defense procurements

Iason Skouzos & Partners > Practice Areas  > Public Procurement  > Changes introduced by law 3978/2011 in Defense procurements

Changes introduced by law 3978/2011 in Defense procurements

Chapter Γ’ (C) of recent law 3978/2011 (16.6.2011) on Public Procurement in the field of Defense and Security, harmonization with EU directive 2009/81 and other matters relating to the Ministry of Defense brought significant changes in the legal framework of defense procurement.

The changes affect to a very large extent companies who act as intermediaries between bidders and the Ministry of Defense, in an effort to enhance transparency and combat corruption. The law may be seen as a reflex of the legislator to recent scandals that were publicized, related to bribes channeled through offshore entities that were appearing as consultants of the state to big defense procurements.

We hereby summarize the main points of the new provisions

–              In the performance of their duties, military and civil personnel of the Ministry of Defence are only allowed to be in contact with legal representatives of enterprises participating in procurement bids or in negotiation procedures prior to the conclusion of contracts (article 8 par. 1)

–              Prior to any contact, the director of the relevant department and the Chief of General Staff or the general director of the relevant general directorate must be informed. After the end of each contact, a memo is drafted to be inserted in the relevant file. The contact is announced through the central webpage of the Ministry of Foreign Defense, at the day when it takes place.

–              It is forbidden for military and civil personnel of the Ministry of Defense to seek or accept directly or indirectly any pecuniary benefit or gift or consideration during the performance of their duties, even if such act does not constitute per se a criminal offence according to other legal provisions.

–              Feedback and information by companies for military equipment may only be provided within the scope of a “technical discussion” of article 31 of the present law (see below) or within the scope of informative meetings organized by the competent departments for the presentation of new technological developments in specific sectors as well as within the frame of participation in international exhibitions and forums.

ARTICLE 31 – “Technical discussion”

1.            Before the commencement of the procedure for conclusion of a contract in the field of defense, whether it falls within the scope of the present law or is secluded thereof, the bidding authority may, at its discretion, through the process of a “technical dialogue”, to consult with economic bodies (definition: contactor, supplier of goods or services), with the aim to collect information and acquire consultation on issues that it considers as important for the determination of the technical aspects of the agreement in the contractual documents, e.g. especially for the determination of the technical specifications of the contract, under the condition that this consultation does not prejudice competition.

2.            The technical discussion takes place following a special invitation for an open, non binding participation of the interested parties, which is publicized in the website of the bidding authority and is also publicized with other possible ways that the authority thinks fit.

3.            The invitation mentions the data relevant to the bidding authority, the subject-matter of the contract, the ways of submitting comments, the relevant deadline, and any other additional information related to the contract to be concluded.

4.            The technical dialogue lasts at least fifteen (15) days and may not exceed sixty (60) days after the invitation (little variations are provided here)

5.            More details about procedural aspects of the “technical discussion” may be provided by decision of the Minister of Defense.

Violation of the above provisions is a disciplinary offence. Punishment varies according to the status of the personnel (military, civil, private).

Article 9 – rules for the transparency and the combat of corruption applicable to economic bodies (definition: contactor, supplier of goods or services)

1.            It is forbidden for economic bodies and for their legal representatives who participate in the process of conclusion or execution of procurement contracts in the field of defense to have or to use any intermediary, middleman or agent for the conclusion or the execution of the contract.

2.            The economic bodies of paragraph 1 may only seek professional advice in relation to the contract from law offices, tax and technical advisors.

3.            It is forbidden for the economic bodies of paragraph 1 or their legal representatives to use offshore companies or other similar economic bodies, regardless of the type of legal entity as subcontractors, suppliers of goods or services in relation to the contract. The definition of offshore entities follows the relevant definition applied in the income tax code.

4.            The economic bodies participating in defense procurement contracts, whether those contracts fall within the scope of the present law or not, must submit to the bidding authority a list with all the data of every agreement they have in place, oral or written, with any supplier, subcontractor, or service provider or consultant, which relates to the subject matter of the contract.

5.            Where the economic body has assigned rights to any subcontractor in relation to the contract, a copy of the contract by which the rights are assigned must be given to the authority.

6.            Economic bodies may not employ military or civil personnel of the ministry of defense before 3 years are elapsed after the termination of the employment relationship of such personnel with the ministry.

7.            Violation of the above obligations and failure to cure the problem within 30 days, may result in the economic body being revoked from the contract and/or financial penalties up to 20% of the value of the contract and in certain circumstances, may be precluded from participating in bids for at least 3 years

8.            The same obligations that apply to economic bodies apply also to the subcontractors thereof.

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